HERTZ GLOBAL HOLDINGS, INCHTZ
HERTZ GLOBAL HOLDINGS, INC Fair Value Disclosure
Fair Value Measurements
Under U.S. GAAP, entities are allowed to measure certain financial instruments and other items at fair value. The Company has not elected the fair value measurement option for any of its assets or liabilities that meet the criteria for this option. Irrespective of the fair value option previously described, U.S. GAAP requires certain financial and non-financial assets and liabilities of the Company to be measured on either a recurring basis or on a nonrecurring basis.
Fair Value Disclosures
The fair value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities, to the extent the underlying liability will be settled in cash, approximates the carrying values because of the short-term nature of these instruments.
Debt Obligations
The fair value of the debt facilities is estimated based on quoted market rates as well as borrowing rates currently available to the Company for loans with similar terms and average maturities (i.e., Level 2 inputs).
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (In millions) | Nominal Unpaid Principal Balance | Aggregate Fair Value | Nominal Unpaid Principal Balance | Aggregate Fair Value | |||||||||||||||||||
| Other Non-Vehicle Debt | $ | 4,828 | $ | 4,187 | $ | 4,920 | $ | 4,399 | |||||||||||||||
Exchangeable Notes Due 2029 | 271 | 311 | 250 | 289 | |||||||||||||||||||
Exchangeable Notes Due 2030 | 425 | 324 | — | — | |||||||||||||||||||
| Total Non-Vehicle Debt | 5,524 | 4,822 | 5,170 | 4,688 | |||||||||||||||||||
| Vehicle Debt | 11,679 | 11,662 | 11,280 | 11,100 | |||||||||||||||||||
| Total | $ | 17,203 | $ | 16,484 | $ | 16,450 | $ | 15,788 | |||||||||||||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the Company's cash equivalents, restricted cash equivalents and Public Warrants that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents and restricted cash equivalents | $ | 287 | $ | — | $ | — | $ | 287 | $ | 229 | $ | — | $ | — | $ | 229 | |||||||||||||||||||||||||||||||
| — | — | 21 | 21 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Public Warrants | $ | 222 | $ | — | $ | — | $ | 222 | $ | 178 | $ | — | $ | — | $ | 178 | |||||||||||||||||||||||||||||||
Exchange Features 2029 | — | — | 78 | 78 | — | — | 61 | 61 | |||||||||||||||||||||||||||||||||||||||
Exchange Feature 2030 | — | — | 54 | 54 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Cash Equivalents and Restricted Cash Equivalents
The Company’s cash equivalents and restricted cash equivalents primarily consist of investments in money market funds and bank money market and interest-bearing accounts. The Company determines the fair value of cash equivalents and restricted cash equivalents using a market approach based on quoted prices in active markets (i.e., Level 1 inputs).
Public Warrants – Hertz Global
Hertz Global's Public Warrants are classified as liabilities and recorded at fair value in the accompanying consolidated balance sheets as of December 31, 2025 and 2024 in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity ("Topic 480"). See Note 18, "Public Warrants – Hertz Global," for further details. Upon issuance in June 2021, the initial fair value of the Public Warrants was $800 million. The Company calculates the fair value based on the end-of-day quoted market price, a Level 1 input of the fair value hierarchy. For the years ended December 31, 2025, 2024 and 2023, the fair value adjustments resulted in a loss of $44 million and gains of $275 million and $163 million, respectively, and are recorded in change in fair value of Public Warrants in the accompanying consolidated statements of operations for Hertz Global.
Exchangeable Notes Due 2029 - Bifurcated Derivatives
The Exchangeable Notes Due 2029 contain an embedded conversion feature (the "Exchange Feature 2029") that was required to be bifurcated and accounted for separately from the Exchangeable Notes Due 2029 as a derivative liability at fair value. Upon issuance in June 2024, the Company recognized a debt discount within non-vehicle debt, representing the initial fair value of the Exchange Feature 2029.
As disclosed in Note 7, "Debt," the Exchangeable Notes Due 2029 bear PIK interest payable semi-annually on January 15 and July 15. Upon the Semi-annual PIK Event in the first and third quarters of 2025, the Company bifurcated the Exchange Feature 2029 PIK and recognized debt discounts of $3 million and $8 million, respectively, within non-vehicle debt, representing the initial fair values.
As of December 31, 2025, the fair value of the Exchange Feature 2029 and the Exchange Feature 2029 PIK (collectively, the "Exchange Features 2029") was $78 million. Refer also to Note 12, "Financial Instruments," for further information.
The fair value of the Exchange Features 2029 was determined using a lattice model and a “with-and-without” valuation methodology. The inputs used to estimate the fair value of the Exchange Features 2029 include the probability of potential settlement scenarios, the expected timing of such settlement and an expected volatility determined by reference to historical stock volatilities. As the expected volatility input is considered unobservable, the Company has categorized the Exchange Features 2029 as Level 3 input in the fair value hierarchy.
The estimated fair value of the Exchange Features 2029 was computed using the following key inputs as of December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||
| Hertz Global common share price | $ | 5.14 | $ | 3.66 | ||||
| Expected term (years) | 3.54 | 4.54 | ||||||
| Risk-free interest rate | 3.60 | % | 4.35 | % | ||||
| Credit spread | 11.26 | % | 8.55 | % | ||||
| Expected volatility | 35.00 | % | 48.75 | % | ||||
The significant unobservable input used in the fair value measurement of the Exchange Features 2029 is expected volatility. Holding other inputs constant, an increase (decrease) in expected volatility would have resulted in a higher (lower) fair value measurement, respectively.
The following table summarizes the activity related to the Exchange Features 2029 measured at fair value utilizing significant unobservable inputs (Level 3):
| (In millions) | Exchange Features | ||||
| Balance as of December 31, 2023 | $ | — | |||
| Initial recognition of derivative liability | 68 | ||||
(Gain) loss in fair value recognized in earnings(1) | (7) | ||||
Balance as of December 31, 2024 | 61 | ||||
| Initial recognition of derivative liability | 11 | ||||
(Gain) loss in fair value recognized in earnings(2) | 6 | ||||
Balance as of December 31, 2025 | $ | 78 | |||
(1) Included in Non-vehicle interest expense, net in the accompanying audited consolidated statements of operations for the twelve months ended December 31, 2024.
(2) Included in Non-vehicle interest expense, net in the accompanying audited consolidated statements of operations for the twelve months ended December 31, 2025.
Exchangeable Notes Due 2030 – Bifurcated Derivative
The Exchangeable Notes Due 2030 contain an embedded conversion feature, the Exchange Feature 2030, that was required to be bifurcated and accounted for separately from the Exchangeable Notes Due 2030 as a derivative liability at fair value. Upon issuance in September 2025, the Company recognized a debt discount within non-vehicle debt, representing the initial fair value of the Exchange Feature 2030. Refer to Note 7, "Debt," and Note 12, "Financial Instruments," for further information.
As of December 31, 2025, the fair value of the Exchange Feature 2030 was $54 million. Refer also to Note 12, "Financial Instruments," for further information.
The fair value of the Exchange Feature 2030 was determined using a lattice model and a “with-and-without” valuation methodology. The inputs used to estimate the fair value of the Exchange Feature 2030 include the probability of potential settlement scenarios, the expected timing of such settlement and an expected volatility
determined by reference to historical stock volatilities. As the expected volatility input is considered unobservable, the Company has categorized the Exchange Feature 2030 as Level 3 in the fair value hierarchy.
The estimated fair value of the Exchange Feature 2030 was computed using the following key inputs at the measurement date as of December 31, 2025 and upon issuance:
| December 31, 2025 | Issuance | ||||||||||
| Hertz Global common share price | $ | 5.14 | $ | 6.84 | |||||||
| Expected term (years) | 4.75 | 5.01 | |||||||||
| Risk-free interest rate | 3.71 | % | 3.74 | % | |||||||
| Credit spread | 12.45 | % | 8.36 | % | |||||||
| Expected volatility | 35.00 | % | 35.00 | % | |||||||
The significant unobservable input used in the fair value measurement of the Exchange Feature 2030 is expected volatility. Holding other inputs constant, an increase (decrease) in expected volatility would have resulted in a higher (lower) fair value measurement, respectively.
The following table summarizes the activity related to the Exchange Feature 2030 measured at fair value utilizing significant unobservable inputs (Level 3):
| (In millions) | Exchange Feature 2030 | ||||
| Balance as of December 31, 2024 | $ | — | |||
| Initial recognition of derivative liability | 103 | ||||
(Gain) loss in fair value recognized in earnings(1) | (49) | ||||
Balance as of December 31, 2025 | $ | 54 | |||
(1) Included in Non-vehicle interest expense, net in the accompanying audited consolidated statements of operations for the year ended December 31, 2025.
Capped Call Transactions 2030
As of December 31, 2025, the fair value of the Capped Call Transactions 2030 was $21 million. Refer also to Note 12, "Financial Instruments," for further information.
The fair value of the Capped Call Transactions 2030 was determined using a Monte Carlo simulation model. The key inputs used to estimate the fair value of the Capped Call Transactions 2030 include the share price of Hertz Global common stock, remaining contractual term, risk-free interest rate and an expected volatility determined by reference to historical stock volatilities. As the expected volatility input is considered unobservable, the Company has categorized the Capped Call Transactions 2030 as Level 3 in the fair value hierarchy.
The estimated fair value of the Capped Call Transactions 2030 was computed using the following key inputs at the measurement date as of December 31, 2025 and upon issuance:
| December 31, 2025 | Issuance | ||||||||||
| Hertz Global common share price | $ | 5.14 | $ | 6.80 | |||||||
| Expected term (years) | 4.75 | 5.00 | |||||||||
| Risk-free interest rate | 3.71 | % | 3.74 | % | |||||||
| Dividend yield | — | % | — | % | |||||||
| Expected volatility | 36.00 | % | 36.00 | % | |||||||
The significant unobservable input used in the fair value measurement of the Capped Call Transactions 2030 is expected volatility. Holding other inputs constant, an increase (decrease) in expected volatility would have resulted in a higher (lower) fair value measurement, respectively.
The following table summarizes the activity related to the Capped Call Transactions 2030 measured at fair value utilizing significant unobservable inputs (Level 3):
| (In millions) | Capped Call Transactions 2030 | ||||
| Balance as of December 31, 2024 | $ | — | |||
| Initial recognition of derivative asset | 37 | ||||
Gain (loss) in fair value recognized in earnings(2) | (16) | ||||
Balance as of December 31, 2025 | $ | 21 | |||
(1) Included in Non-vehicle interest expense, net in the accompanying audited consolidated statements of operations for the year ended December 31, 2025.
Financial Instruments
The fair value of the Company's financial instruments as of December 31, 2025 and 2024 are disclosed in Note 12, "Financial Instruments." The Company's financial instruments are priced using quoted market prices for similar assets or liabilities in active markets (i.e., Level 2 inputs), excluding the Exchange Features 2029, the Exchange Feature 2030 and the Capped Call Transactions 2030, each as disclosed above, which are categorized as Level 3 in the fair value hierarchy.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
During the third quarter of 2024, at the conclusion of the Company’s historical peak rental season, there was a reduction in the cash flow projections in the Americas RAC and International RAC segments, indicating that the carrying values of their long-lived assets may not be recoverable. As a result, the Company tested the recoverability of the “Long-Lived Assets” in its Americas RAC and International RAC segments and determined that an impairment existed. Effective August 31, 2024, the Long-Lived Assets were written down to their estimated fair values (determined using Level 2 inputs). See Note 4, "Long-Lived Assets Impairment," for additional information.
Resulting from the Company's desire to sell the EV Disposal Groups, the associated assets were classified as held for sale and recorded at the lower of carrying value or fair value (as determined using Level 2 inputs) less costs to sell. As of December 31, 2024, the sale of the EV Disposal Groups was substantially complete. See Note 5, "Revenue Earning Vehicles," for additional information.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 12, 2024 | |
| 2022 | Feb 7, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 6, 2017 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.